The dynamics of energy generation, consumption, and pricing on industrial growth in the SSA region; exploring the moderating effect of financial development and technological advancement

Abstract

Countries worldwide, especially the developing economies of Sub-Saharan Africa (SSA), are grappling with the challenge of balancing energy and industrialization. This paper delves into the relationship between energy components (energy generation, consumption, and pricing) and industrialization in the SSA countries. The study investigates the impact of energy components (energy generation, consumption, and pricing) on industrialization in selected Sub-Saharan African (SSA) economies over the period 1990–2022, using panel data sourced from reputable institutions, including the World Bank, the Federal Reserve Economic Data (FRED), the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund (IMF). Employing the panel unit root tests, Westerlund cointegration, and Cross-Sectional Autoregressive Distributed Lag (CSARDL) methodology, the study reveals a significant long-term relationship between energy components and regional industrial growth. Energy generation positively contributes to industrialization, whereas energy consumption and pricing exhibit negative effects. Furthermore, the Dumitrescu and Hurlin (D-H) causality analysis indicates a one-way causality from energy generation to industrialization and from industrialization to energy consumption and pricing, with no causality observed between financial development and industrial growth. These findings underscore the critical need for the SSA countries to adopt robust financial systems and modern technologies to mitigate the adverse impacts of energy pricing on industrial development. The results provide crucial policy recommendations for enhancing energy efficiency and fostering sustainable regional industrialization.